By J. Marc Fosse and Ameera Salem

Seyfarth Synopsis:  As reporting companies prepare their Pay Versus Performance (PVP) disclosures for their upcoming proxy statements, they should take into consideration the most recent guidance on the topic in Securities and Exchange Commission’s (SEC’s) Compliance & Disclosure Interpretations (CD&Is).

The PVP disclosure rules (Item 402(v) of SEC Regulation S-K) require public reporting companies to disclose (for fiscal years ending on or after December 16, 2022) the relationship between executive compensation actually paid and the companies’ financial performance. To assist companies in navigating these rules, the SEC has issued a series of CD&Is (found here.) This blog post summarizes the most recently issued/updated PVP CD&Is published by the SEC on November 21, 2023.

Peer groups used to determine total shareholder return (TSR):

Use of more than one published industry or line-of-business index. If a company uses multiple published industry or line-of-business indices for purposes of the stock performance graph under Item 201(e)(1)(ii), it may choose which index it uses for purposes of its PVP disclosure. For purposes of clarity, the company should include a footnote disclosing the index chosen. With respect to changing the published industry or line-of-business index used from that used in the immediately preceding year, companies must footnote the reason for this change and compare its cumulative TSR using the old and new peer group. (C&DI 128D.24).

Adding or removing entities from a peer group. Companies that use a peer group other than a published industry or line-of-business index as its peer group under Regulation S-K, are required to (1) include a footnote that explains the reasons for the change in the composition and (2) compare its cumulative TSR return using the old and new peer group. Recalculation of the TSR using the old peer group is not required if changes to the peer group are because the entity omitted is no longer in the peer group or due to the application of pre-established objective criteria. (C&DI 128D.27).

No broad-based equity index peer group.  If a registrant discloses in its Compensation Discussion and Analysis (CD&A) that it determines relative TSR for equity vesting based on a broad-based equity index, the registrant may not use a broad-based equity index as a peer group for determining TSR for purposes of the PVP disclosure. (C&DI 128D.25).

Peer group market capitalization weighting. For purposes of the PVP disclosure rules, the returns of each entity in the peer group must be weighted according to the company’s stock market capitalization only when a custom peer group is used that is not a published industry or line-of-business index. (C&DI 128D.26).

TSR peer group. Instruction 1 to Item 402(v) states that in a registrant’s first filing in which it provides PVP disclosure, the disclosure may be for three years, instead of five years, and may provide disclosure for an additional year in each of the two subsequent annual filings in which this disclosure is required.  In the revised C&DI, the SEC clarified that for a 2024 proxy statement, if a registrant uses the same peer group for 2023 as it used for 2022, then the most current peer group should be used to calculate TSR for all prior years in the table. If the peer group TSR in 2023 and in subsequent years changes, companies must (1) include a footnote to the PVP table that explains the reason for the change and (2) compare the company’s cumulative total return with that of both the newly selected peer group and the peer group used in the immediately preceding fiscal year. (C&DI 128D.07, Revised).

Calculation of compensation actually paid (CAP):

Equity Awards Vesting on Retirement.  For purposes of calculating compensation actually paid (CAP), equity awards with retirement eligibility as the sole vesting condition should be considered vested on the retirement eligibility date. However, if retirement eligibility is not the sole vesting condition, then those other conditions must be considered. The revised CD&I provides examples of such conditions, which include a market condition or a condition that results in vesting upon the earlier of the holder’s actual retirement or the satisfaction of a requisite service period. (C&DI 128D.18, Revised).

Dividends paid prior the vesting date should be included in CAP. The amount of dividends or dividend equivalents paid on awards prior to the vesting date (and not otherwise included or reflected in another component of total compensation) should be included in the CAP for each of the years represented in the PVP table. This would mean that the fair value of awards should reflect the prior dividends paid during that year and must be included not to understate the CAP.  (C&DI 128D.23).

Multiple Principal Financial Officers (PFO). If two (or more) individuals served as a registrant’s PFO during a single covered fiscal year, then each must be included individually in the calculation of average compensation amounts for NEOs in the PVP table. For purposes of providing clarity to investors, companies should consider additional disclosures on the impact of inclusion of such individuals on the calculation. (C&DI 128D.30).

Transition Relief

Companies losing their SRC or ECG status.A smaller reporting company (SRC) that loses its SRC status as of January 1, 2024, is permitted to use scaled PVP disclosures in the 2024 proxy statement. In the future, however, such a company will need to provide the full non-scaled PVP disclosures. (C&DI 128D.28). An emerging growth company (EGC) that loses its EGC status is required to include PVP disclosures in its proxy statement immediately upon losing status. Some relief is available to companies that lose their EGC status and are newly subject to the rules, and such companies may provide PVP disclosures for three years of initial disclosure, instead of five years. (C&DI 128D.29).


The newest SEC CD&Is provide important answers to companies’ questions about the content and form of PVP disclosures. These and other CD&Is, along with SEC comment letters, should be reviewed and followed as companies prepare their initial or continuing PVP disclosures.

If you have questions regarding the new CD&Is or other executive compensation disclosure matters, please contact a member of Seyfarth’s executive compensation practice group. Learn more about our Executive Compensation practice here.